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Fund managers' appetite for risk reduced: survey

Investors around the world have reduced their risk appetite in the wake of the sell-off in stock markets last month, according to a survey on fund managers worldwide released by Merrill Lynch yesterday.

The US brokerage polled a total of 199 fund mangers who manage a combined US$668 billion in assets for the monthly global survey between March 9 and March 15.

The survey showed that global money managers have heightened their aversion to risk and portfolio managers have increased their cash balances sharply, up from 3.8 percent to 4.4 percent, with 30 percent of respondents saying they are "overweight cash".

Merrill Lynch's Composite Indicator for Risk Appetite fell five points this month to record one of its lowest readings of the past five years. The survey suggests portfolio managers have shrunk their investment time horizon to an average seven months, the shortest in four years.

"Investor visibility is at its poorest since the spring of 2003 when Iraq was invaded and fears of global deflation were high," David Bowers, independent consultant to Merrill Lynch, said in a statement released yesterday.

"That risk has been re-priced is not a surprise. What is interesting is the extent to which this sell-off reflects a more fundamental reassessment by investors of global macro prospects," Bowers said.

Investors are slightly more cautious about the outlook for economic growth and corporate profits, but only 10 percent of those polled believe that a global recession is likely in the next 12 months, the survey said.

The majority of investors have not abandoned equities, as 34 percent of portfolio managers believe that stock markets are unlikely to be lower six months from now, up from 15 percent last month, and 25 percent of asset allocators intend to raise their exposure to equities over the next three months, the poll said.

The poll suggested that investors are concerned about the possibility of increased "country risk" associated with US assets, and the US has the least favorable outlook for corporate profits, with the Eurozone the most favorable.
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